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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35357  
Subject: Hmm, The borrowing, saving inflation Dilemma Date: 12/9/2009 10:40 AM
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If we accept that borrowers benefit more from inflation than the loaners than isn't it preferable to be the borrower during a significant run up in inflation?

If you can refinance or you already have a mortgage that is well structured for you then you are holding a good card. If your mortgage isn't well structured for you what can you do to restructure it to take advantage of the presumed forthcoming inflation and will hold its own under less inflationary conditions.

It would also make better sense to borrow money for 6 or 7 years when buying your next car, especially if you can get a favorable rate. It would be preferred over paying cash or a 2 or 3 loan or accelerated pay off.

Borrowing to invest, leverage, has its pitfalls but it also may have potential benefits. I'm thinking more of a large loan to buy a successful franchise type business aka McDonald's, Taco Bell, Dunkin Donuts and the like. If one borrowed 250k - 450k to set up a franchise that has relatively constant foot traffic under most economic conditions. Other choices would be to become a landlord of apartments or self storage, a real gold mine would be a well placed parking structure. The up side is as the years go buy you will be paying off your loan with "cheaper" money then you borrowed.

With the exception of the mortgage example most of the above strategies do not make common sense to folks who were taught to save, to LBYM and to generally manage our household finances with prudence. They are more the behaviors of entrepreneurs then blue and white collar employees. It is an interesting dilemma to consider that living prudently may be as risky or riskier then taking an educated chance on leveraging.

jack
just kicking tires
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